Major English-conversation school operator Nova Corp. is struggling to pay refunds for prepaid lessons to students who canceled their contracts with the company midterm and has had difficulty paying employees’ salaries, according to sources.

The Osaka Chuo Labor Standards Inspection Office in Osaka has instructed the Osaka-based company four times to pay wages to its workers that it has owed since July.

Nova has completely changed its “expansionary course” business strategy. It had closed about 50 schools in Tokyo and surrounding areas and Osaka as of Sept. 30 and drastically cut its TV commercials and other advertising.

Nova has to refund large amounts of money in many cases because students have to prepay lesson fees, often for hundreds of classes, when they sign contracts with the company.

According to Nova, the number of contracts canceled increased sharply after the Supreme Court ruled in April that the company’s unfair cancellation policy was illegal. Nova had 418,000 students as of March 31, but there were 7,880 cancellations between April and June, which cost the company 1.62 billion yen in total.

Cancellations continued after the Economy, Trade and Industry Ministry ordered the company to partially suspend its operations in June, judging that its sales pitch to students violated the Specified Commercial Transactions Law. The ministry said that Nova falsely explained to students that lessons can be reserved any time they want, and made exaggerated claims in advertisements during a special campaign offering free sign up.

Since June, consumer centers in Tokyo have received several dozen complaints and requests for consultations. In one case, a caller said, “I haven’t received a refund from Nova even though I canceled lessons more than three months ago.” Consumer centers around the nation are receiving similar complaints, according to the sources.

If students sign a contract with Nova to pay tuition with a credit card in installments and Nova did not refund fees for cancelled classes, they can refuse to pay the charges to their credit card company. However, if students paid cash in advance for lessons and then canceled their contract, there is little they can do but wait for Nova to refund the money.

There is no legal deadline for refunding lesson fees upon cancellation, but the Tokyo metropolitan government has instructed Nova to pay such refunds as soon as possible. Representatives of the National Union of General Workers Tokyo South in Minato Ward, Tokyo, and General Union in Osaka, of which some of Nova’s foreign teachers are members, requested METI on Tuesday to instruct Nova to refund the fees promptly.

Economy, Trade and Industry Minister Akira Amari said at a press conference Tuesday that Nova needs to make sincere efforts to solve the problems. “We’d like to respond to the problem in areas where the ministry can intervene,” he said.

Nova has not paid salaries to 2,000 Japanese employees since July. About 5,000 foreign employees have not yet received their salaries for September.

A senior foreign teacher working in a Nova’s school in the Kinki region said, “An instructor I know has been asked to leave his apartment rented by Nova because the company has failed to pay the rent.”

A Japanese employee working at one of schools in Tokyo said when he asked Nova’s headquarters the reason for the delay in salary payments, the person he spoke to simply said, ‘I don’t know.’ “Because there isn’t enough information about why the schools were closed and why the refund has been delayed, it’s difficult for me to explain about the matter to students,” he said.

http://www.yomiuri.co.jp/dy/national/20071010TDY02305.htm

English-language school Nova Corp. has raised �70 million in cash by issuing warrants for 200 million shares in total to two investment companies registered in the Virgin Islands, according to a paper submitted to the Kanto Local Financial Bureau and released to the public Tuesday.

According to the paper, the scandal-hit language school will use the cash to cover such expenses as teachers’ salaries and property rent.

If the two firms fully exercise their right to obtain new shares, for a cost of �7 billion in total, it would increase the number of Nova’s outstanding shares fourfold, diluting the share value and thereby damaging the assets held by current stockholders.

In such a case, Nova would receive �6.4 billion, excluding the costs of issuing new shares.

The paper identified the two investment firms as Rich Peninsula Trading Ltd. and Tower Sky Profits Ltd. For a period of about one year starting Oct. 24, they can exercise the right to purchase shares for �35 apiece, the paper said.

Nova has about 67.6 million outstanding shares. The stock’s price closed at �40 Tuesday.

METI to step in

The Ministry of Economy, Trade and Industry plans to order Nova Corp. to promptly pay back tuition to customers who cancel lessons in accordance with their contracts, officials said Tuesday.

The labor union assisting teachers at the scandal-hit chain of English-language schools meanwhile requested that METI take action to secure the teachers’ jobs and prevent further harm to students.

Nova, an industry leader, has been hit with decreasing enrollment and numerous canceled contracts since it was ordered by METI in June to suspend part of its operations for lying to consumers in advertisements about its services.

Concerned that Nova’s actions could damage the image of the entire English-language school industry, METI has decided to set up measures in cooperation with industry organizations such as the Japan Association for the Promotion of Foreign Language Education, the officials said.

Nova is scheduled to submit to METI by next Monday a report on its plan to improve operations.

On behalf of Nova teachers, representatives of the General Union, whose members include foreign instructors working for language schools, visited the ministry to file a written demand directed to METI chief Akira Amari.

“Nova is now facing a serious crisis,” Katsuji Yamahara, head of the multinational General Union, said at a news conference after meeting with ministry officials. “We asked METI for immediate action to save customers and teachers.”

Many former students have not had their tuition fees refunded even after leaving the school, Yamahara said.

“Only Nova knows how many such cases exist and how much money has not been returned,” he said. “It could be huge.”

Union officials also said Osaka-based Nova had temporarily failed to pay wages to some of its teachers, mainly those of foreign nationality. Wages for some of its Japanese staff have been put on hold as of Tuesday.

Some 4,000 foreign teachers are currently registered with Nova nationwide. The number has been declining from a high of 6,000 due to the company’s numerous problems with employees, the union officials said.

Nova is reportedly looking to close some 200 of its 900 branches nationwide in an effort to revamp operations that have been battered by the scandal.

“It’s not pleasant working for Nova right now,” Bob Tench, a British teacher who has worked at Nova for 13 years, said.

“Every month we don’t know if we are going to get paid or not. A company like Nova, a big employer, can be more professional in the way it does business,” said Tench, a member of the labor union.

http://search.japantimes.co.jp/cgi-bin/nn20071010a2.html